Carvana takes stand against hidden fees; reports strong Q3 earnings
After announcing in late October that it showed a 41% year-over-year revenue increase in the third quarter, Carvana on Friday announced a “Live Feelessly” campaign, encouraging customers to take a stand against hidden, last-minute fees.
The campaign communicates to consumers that they should seek pricing transparency when making purchases.
The Live Feelessly campaign includes a new 30-second TV ad and digital assets.
It also includes a social media movement, #FeelessFriday, encouraging consumers to go fee-free on Fridays.
“When we pioneered online car buying more than seven years ago, we knew we would do a lot of things differently, including not relying on standard industry practices like last-minute ‘doc fees,’” Carvana chief brand officer Ryan Keeton said in a news release.
Keeton continued, “At Carvana, we believe in treating people better, and empowering them to make their next purchase on their own terms. That means giving our customers detailed, 360-degree photos of every vehicle, inside and out, financing terms in minutes, a real offer on their trade-in and no hidden, last-minute fees; a transparent purchase from start to finish so they can Live Feelessly.”
Carvana notes that consumers’ lives are filled with fees. Those can include food delivery, travel, and car buying.
“But when you Live Feelessly, you choose freedom over fees,” Carvana stated.
The company said social media fans can make Fridays fee-free and post their #FeelessFriday actions and tips on Instagram and Twitter, showing how they are going to Live Feelessly.
For example, if people cook dinner instead of ordering delivery, go camping instead of paying resort fees at a hotel or get cash at their bank instead of paying ATM fees, they can tag @gocarvana on Instagram or @carvana on Twitter to “show off your #FeelessFriday,” Carvana said.
The company said many people are unaware of fees, which are avoidable and often times hidden, that mark-up the sale price of a car. Those fees, which can include doc fees, prep fees, cleaning fees, and market adjustment fees, average nearly $2,000 per vehicle purchase, according to Carvana. The company added that only 15 states have limitations in place for dealer documentation fees, which it says are one of the highest hidden fees.
According to Carvana, those fees disproportionately affect first-time car buyers and those with smaller budgets.
“Our research has shown that many car buyers who are shopping at a lower price point, and more specifically on the market for a used vehicle, need and are looking for more trust and ‘making smart choices’ when it comes to their car purchase,” Alexander Edwards of Strategic Vision was quoted as saying in a Carvana news release. “They have a significantly higher ‘financial trigger’ such as running the vehicle into the ground or simply being attracted to current pricing.”
Carvana also pointed to data from YouGov Profiles showing that more than one in three consumers planning to buy a used car in the next year intend to spend less than $10,000.
The company said an additional $2,000 in fees is a significant for those consumers, and those fees represent an often-unexpected cost increase to budgets that may already be experiencing COVID-19 related constraints.
According to Carvana, because more than half of all used vehicle purchases involve financing, many of these fees can often continue to grow throughout a loan’s term agreement.
Regarding Carvana’s third-quarter 2020 financial results for the quarter ended Sept. 30, the company said it sold 64,414 retail units, which was a 39% year-over-year increase. Carvana’s revenue of $1.544 billion was a 41% year-over-year increase. And its total gross profit of $261.3 million was a year-over-year increase of 90%.
In addition, Carvana showed a 128% year-over-year increase in vehicles purchased directly from customers.
“Third quarter results were incredible,” Carvana founder and chief executive officer Ernie Garcia said.
Garcia continued, “We delivered another quarter of strong growth and crossed many financial milestones. This was only made possible by our incredible team, their relentless focus on delivering the best customer experiences available when buying a car, and all the progress that focus has generated since launching the company seven years ago. We can't thank them enough.”